The bullwhip effect in a 3-stage supply chain considering multiple retailers using a moving average method for demand forecasting

Abstract

The bullwhip effect is an undeniable phenomenon in supply chains that has a negative effect on their performance and efficiency. There are a variety of causes for the appearance of the bullwhip effect, one most important of which is the existence of uncertain demand. Due to the variety of causes as well as in order to recognize relevant factors, it is important to be able to quantify the bullwhip effect in a supply-chain environment. In this study, we aim to quantify the bullwhip effect in a 3-stage supply chain with multiple retailers. First, we quantify the bullwhip effect, order rate variance ratio (OVR) and inventory variance ratio (IV) in a pipeline supply chain, for which we develop a relation to calculate the bullwhip effect. Then we extend it to a supply chain with multiple retailers. We analyze the impact of service levels on the bullwhip effect for both defined supply chain situations. This analysis, which highlights the importance of the impact of service levels on the bullwhip effect, can be considered the main contribution of this paper. In addition, we survey the influence of the correlation coefficient on the bullwhip effect.